What do assessment appeals mean for the Pgh. Mills TIF?

What do assessment appeals mean for the Pgh. Mills TIF?

Summary: Property
assessment appeals have impacted the assessed values of a retail development
aided by tax-increment financing (TIF).
As a result, special assessments authorized by the development’s status
as a Neighborhood Improvement District (NID) have been levied in the past few
years. Yet again, the risks of TIF for
retail have been laid bare.

“A Neighborhood Improvement District will be created
by the township pursuant to the Neighborhood Improvement District Act and a
special assessment will be authorized by the township and imposed on the
taxable property within the TIF district… Special assessments shall be levied
in any given year only if the tax increment revenues are insufficient to cover
debt service on the TIF bonds, funds transferred to the public safety fund, and
administrative costs related to the TIF bonds.”

“Since 2016 a number of owners of property located
within the TIF district have appealed the real estate tax assessments currently
imposed by the local taxing bodies. … Although there has been no failure to
pay any Special Assessments in the past, [the Redevelopment Authority of
Allegheny County] expects that the probable reduction of TIF revenues and
related increase in Special Assessments may have a material adverse effect on
property owners within the TIF district and therefore, may have a material
adverse effect on the ability of RAAC to repay the bonds when due.”

With a few years remaining for
the Pittsburgh Mills TIF district ($50 million in bonds were issued in 2004 and
the district expires in 2023) assessment appeals have had a major impact on the
retail development.

An examination of the
assessed values of the 37 taxable parcels contained in the Neighborhood
Improvement District (NID) reports for 2018, 2019 and 2020 and their recent
appeal status on the Allegheny County real estate website shows 25 parcels
underwent appeal while 12 did not request an appeal. Of the 25 that appealed, 12 have a lower
assessed value as of 2020. Of those 12
appeals eight are currently at the Board of Viewers.

The most significant
reduction was for the mall itself which is now assessed at $14.1 million,
reduced from 2018’s value of $138.4 million.
It sold at auction for $100 in January 2017 following a foreclosure and
then was involved in a 12-parcel sale for $11.3 million in April 2018. A September 2017 news article stated the
owners of the mall were seeking a 92.7 percent reduction in assessed value.

As a result of the appeals, the overall assessed value in the TIF district decreased from $235.8 million to $91.1 million. The mall’s assessed value as a share of the total assessed value of all the parcels fell from 58 percent to 15 percent.

The assessed value of the Pittsburgh Mills development accounts for nearly all of thetaxable commercial value in Frazer Township. Based on the Allegheny County assessment rolls for 2018 through 2020 the township’s taxable commercial value fell from $239.4 million to $94.7 million.

Assessed Value of Pittsburgh Mills
Development, 2018-2020*

*The 2019 total value was adjusted sometime after Jan. 2019 to $91.1 million as a result of the appeals according to Frazer Township

From 2004 to 2015, the
incremental property tax revenues (taxes based on the increase in property
value compared to pre-TIF development value) satisfied the requirements of
servicing the TIF debt and related costs and the special NID assessment did not
came into play and no annual NID payments were required.

However, since 2016,
properties have been subject to the annual NID payment. In the years 2016 to 2020 total annual
payments were $1.2 million, $923,000, $825,000, $5.8 million and $5.95 million.
In 2020, of the 28 parcels subject to an annual payment (nine parcels of vacant
land will not make an annual payment), nearly all will pay more through the NID
annual payment than they would on their 2020 assessed value and current millage
rates.

The 2020 NID report notes
that, due to tax refunds for appeals that lowered assessments, there will be an
additional NID payment for 2019 of $4.6 million ($1.2 million for 2019 was
already billed), bringing the total NID assessment for 2020 to $10.6
million.

The amount outstanding on the
TIF bonds after payments through July 1, 2020, will be $14.9 million. There are two interest payments and one
principal payment due by July 1. After this year the annual NID special
assessments in 2021 through 2023 are $6.1 million, $6.2 million and $6.1
million. These assessments, if considered to be taxes on the property, would
represent a millage rate of nearly 70 mills.

Under the NID law 40 percent
of the affected property owners have to object to the district for it not to be
created. The 2003 ordinance noted there
were no objections to the NID provisions.
Presumably ownership changes in subsequent years (20 parcels have sold
since 2014) have come with full knowledge and understanding of the TIF and NID
being in place and what those entail.

In the 2003 NID plan it was
stated that “it is reasonable to believe the owners are acting in their
interest in consenting to this [NID] imposition because the benefit they
receive from the public improvements exceeds the cost of the special
assessments.” In light of the large
payments now being made, is that still the case?

Once the TIF district expires
and the bonds are fully retired, the diversion of taxes ends and all property
taxes collected will go the TIF participating taxing bodies, Frazer Township,
Deer Lakes School District and Allegheny County. The tax revenue will be much less than was
expected if assessed values remain at current levels. Based on 2020 millage
rates the difference in total property taxes generated is $4 million based on
the new values after appeals.

There are 13 TIF districts in Allegheny
County that are set to expire between 2024 and 2035. Based on the county’s evaluation criteria contained
in its 2015 TIF guidelines there is to be “avoidance” of TIF for retail
developments. Time will tell if that is
adhered to.

We long ago warned about the use of TIFs
for retail projects. TIFs were designed
to help create good jobs-producing redevelopments in blighted areas but were
quickly adopted for retail where multiplier effects are nil and where the
projects become major competitors for customers of non-subsidized retail
outlets.